Generally, high net worth households are those which have an annual income exceeding $300,000 or a net worth over $5 million.
Equitably dividing the assets that make up a matrimonial asset pool of such magnitude can be complicated and can take a long time.
The property settlement process will generally be the same as those with smaller asset pools, and the property settlement will still be governed by the rules of the Family Law Act (1975 (Cth), however it will generally take longer to ascertain the assets, liabilities and contributions of each party, especially if the marriage or de facto relationship was long.
It is imperative that parties with a high net worth seek advice from a reputable family lawyer early.
Understanding High Net Worth Divorce Property Division
As with all property settlements, there is a five-step approach utilised by the Court to determine an equitable division of assets. This five-step approach is as follows:
- Identify all assets and liabilities and thereby determine the value of the asset pool;
- Determine whether it would be just and equitable for each party to walk away with the assets held in their own names;
- Assess the financial and non-financial contributions made by both parties;
- Evaluate the future needs of each party; and
- Review the proposed division of assets to determine if it is just and equitable.
Challenges in High Net Worth Divorce Property Division
There are a number of challenges that parties to a high-net-worth property settlement may face, including:
Hiding assets
One common issue with high-net-worth property settlements is the hiding of assets.
Parties have a duty to disclose all assets and liabilities to ensure the division of assets is just and equitable.
It is common for parties of high-net worth marriages to want to keep their assets and to think they are entitled to hide certain assets because they are solely held in their name. This can be particularly relevant where assets are held in other countries than Australia.
It is imperative however, that both parties disclose all of their assets and liabilities so that a fair and binding outcome can be reached.
If assets are divided and it later becomes apparent that one or both parties hid assets, Court orders for property settlement, consent orders or binding financial agreements can be overturned.
Complexity of Assets and Liabilities
High-net worth matrimonial asset pools are usually made up of a number of different assets.
Most of these marriages do not merely consist of 10 million dollars in the bank, or one property valued at 10 million dollars. Instead, these asset pools are usually made up of multiple properties, some of which may be held in both parties’ names, individual names, or with third parties, businesses or companies, shares and other investments, international investments, trusts and valuable art and jewellery.
For some property settlements, determining the asset pool to be divided can be complicated and time consuming.
Contributions
Many couples will consist of one party who made greater financial contributions, and the other party who may have made greater non-financial contributions, for example they may have been a stay-at-home parent and homemaker.
Sometimes, the party who made greater financial contributions during the marriage may think they are entitled to retain the majority of the matrimonial asset pool based on their income.
This is not always the case. The Court will consider non-financial contributions and give the appropriate weight to those contributions.
The party who made greater non-financial contributions may have stayed at home with the children, sacrificing their own career and superannuation to enable the other party to make greater financial contributions.
Often in these cases a superannuation splitting order equalising the superannuation balance of each party may be appropriate.
Consideration may also be given to inheritances and gifts from parents, and these may be taken into account when the assets are divided.
Tax Implications
Another often overlooked complication can be the tax consequences associated with property settlement.
Should some assets need to be sold for the property settlement, there may be significant capital gains tax liabilities associated with the sale or transfer of properties or businesses, which will need to be considered.
Need Guidance on Family Law Matters?
Navigating family law can be complex and emotionally challenging. Whether you’re dealing with custody issues, divorce proceedings, or any other family law matters, you don’t have to face it alone. Contact Matthies Lawyers today for expert legal advice and compassionate support. Let us help you find the best path forward.
Strategies for Equitable Asset Division
It may be beneficial for individuals with a high-net worth to obtain a binding financial agreement at the commencement of the relationship to minimise the risk of lengthy disputes.
It is important that both parties are forthcoming with the disclosure of documents associated with assets and liabilities to ensure both parties’ have a clear understanding of the asset pool.
Ambiguity can cause the proceedings to go on longer and become more costly.
It may be necessary to obtain valuations from a jointly appointed valuer to increase the likelihood of both parties agreeing on the valuing of contentious assets.
Above all else, it is imperative to seek legal advice from a reputable family lawyer as high-net worth property settlements can be extremely complicated and can cost more in the long run without obtaining the benefit of early legal advice.
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At Matthies Lawyers, we are here to cater to your family law needs. Our team of family lawyers proudly serves clients in South Yarra, Toorak, Windsor, Prahran, Armadale, and Richmond.
Contact us today for expert legal advice and support or call +61 3 8692 2517.
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Kate Scolyer – Solicitor– Matthies Lawyers
Disclaimer: This article contains general information only and is not intended to be a substitute for obtaining legal advice.